A jump in coronavirus cases in South Korea and Germany rattled investors and sent global equities markets lower, while safe-haven assets, including the USD and U.S. Treasuries, edged higher. The accelerating infection rates come as countries ranging from Japan to France are set to emerge from lockdowns that have frozen the global economy. A second wave of infections would likely snuff out the rally in equity markets as investors position for a severe and prolonged global recession. The global alarm was sounded over a potential second wave of coronavirus cases after Germany, relatively successful in slowing the outbreak, reported that infections had accelerated again after the first tentative steps to ease a lockdown.

The S&P 500 closed slightly higher as investors looked beyond new spikes in coronavirus infections to focus on expectations that an economy crippled by mandated shutdowns will soon be re-opened for business. Dow Jones fell 0.45% to end at 24,221.99 points, S&P 500 gained 0.01%, to 2,930.19, Nasdaq climbed 0.78% to 9,192.34.

CURRENCIES

USD rose as investors sought safety on warnings of a second wave of COVID-19 infections. Against a basket of currencies the DXY index was last up 0.43% at 100.15.

USDJPY hit a 15-day low versus the dollar, down around 0.92% and forcing it above 107 to a 107.77 high.

EUR fell, last down around 0.23% at 1.0813 from previous high at 1.0875.

GBP dropped 0.55%, falling from 1.2329 high to 1.2282 lows. Recovered late session back up to 1.2337.

AUD gave up all yesterdays gains towards 0.6561, falling almost 1% to a session low of 0.6456. Rebounded back up towards 0.6490 into NY close.

Traders pushed U.S. Treasury yields higher as they anticipated new government securities being issued to pay for massive stimulus efforts to prop up the economy amid the COVID-19 pandemic.

The benchmark 10-year yield was up 3.9 basis points at 0.7195%.

The two-year U.S. Treasury yield was up 2.8 basis points at 0.1768%.

The gap between yields on two- and 10-year Treasury notes was at 54 basis points, about 2 basis points higher than on Friday's close.

Italian bond yields were higher across the curve, with 10-year yields last up 10 bps on the day at 1.89%. As the sell-off in the Italian market gathered pace, yields on safe-haven German bonds fell back.

Germany's 10-year Bund yield was just marginally higher on the day at around -0.52%.

COMMODITIES

Gold prices retreated as the USD benefited from safe-haven buying driven by fears over a second wave of coronavirus infections. Spot gold was down 0.3% at $1,695.75 per ounce.

Chinese stainless steel futures surged, hitting their highest level in over nine months as domestic demand continued to pick up after coronavirus-related shutdowns. Spot prices of iron ore with 62% iron content for delivery to China rose to $89.3 per tonne.

Copper prices hit eight-week highs as recovering economic activity in China boosted expectations of stronger demand and the country's central bank signalled further stimulus. Benchmark LME copper was down 0.3% at $5,258 however earlier touched $5,370 a tonne, the highest since March 16 and a gain of more than 20% since March 19.

Other metals: Aluminium was up 0.7% at $1,495, zinc added 1.1% to $2,026, lead gained 1.8% to $1,673 and nickel rose 0.2% to $12,345 a tonne.

Oil prices fell as investors worried about a second wave of coronavirus infections, but new output cuts from Saudi Arabia tempered worries about oversupply and limited price losses. Brent crude futures lost $1.37, or 4.4%, to settle at $29.60 a barrel. U.S. WTI crude fell 60 cents, or 2.4%, to settle at $24.14 a barrel.

ECONOMIC CALENDAR TODAY

Australia - April NAB business survey. Confidence and conditions plunged on COVID.

An overnight ‘risk off’ session saw AUD plummet 105 points from yesterdays 0.6561 high as markets ploughed into the USD which saw it rise against most of the major currency pairs.

Since AUD peaked at 0.6570 on April 30 markets have struggled with direction as a 0.6370-0.6570 range trade seems to be setting in. After setting a 7-day high in Asia, the AUD fall seems to have been induced further with AUDJPY selling and commodities futures helping to drive it lower. Concerns about increased COVID-19 infections seems to be gaining more air time overseas with a rise in reported cases coming from South Korea, China and now Germany.

Minor Economic data out in Australia today with the release of the April NAB business survey. There’s also an Australian Federal Government update to watch for any impacts to markets.

In China we have the April releases of both CPI & PPI in which expectations err to a downbeat result for both. The numbers should ease further with lower pork and vegetable prices. PPI deflation will deepen because of declining commodity prices from oil, to cement, coal and rebar. Softening inflation environment will allow further easing from the PBoC, including RRR and interest rate cuts.

In the U.S. April CPI will also be released tonight which will fully factor in the COVID 19 impact for the major industries affected.

For the AUD, opens this morning at 0.6484 after having recovered around 30 points from the overnight selloff. AUD investors struggle for the time being and remain directionless on the next move.

A bearish outside candle formed on daily AUD charts and RSI divergence indicates a potential test of key support near 0.6370/75, especially if risk sours further.

Supports remain at 0.6450 followed by 0.6430. Resistance at 0.6495 and 0.6510.

AUD longs need upbeat risk and USD weakness for a break of April's high to occur. Should Fed Chairman Powell surprise investors on Wednesday by allowing investors to believe negative rates are a possibility, USD weakness and risk-on should take hold.